Franklin Templeton unveils passive EM country ETFs in Europe

Jun 4th, 2019 | By | Category: Equities

Franklin Templeton has launched its first purely passive ETFs in Europe, a suite of four single-country funds providing exposure to the equity markets of Brazil, China, South Korea, and India.

Caroline Baron, Head of ETF Sales EMEA, Franklin Templeton

Caroline Baron, Head of ETF Sales EMEA, Franklin Templeton.

They are the Franklin FTSE Brazil UCITS ETF (FVUB LN), the Franklin FTSE China UCITS ETF (FRCH LN), the Franklin FTSE Korea UCITS ETF (FLRK LN), and the Franklin FTSE India UCITS ETF (FRIN LN).

The funds are linked to capped, market capitalisation-weighted indices from FTSE Russell which target large- and mid-cap companies.

The indices are part of FTSE Russell’s 30/18 Capped range which limit the weight of the largest stock to 30% and the weight of any remaining stock to 18% in a bid to promote diversification.

Reconstitution and rebalancing occur semi-annually, while capping is applied on a quarterly basis.

The Brazil, China, and India ETFs come with total expense ratios (TER) of 0.19%, while the Korea ETF comes in at just 0.09%, reflecting its more advanced and liquid capital market. According to Franklin Templeton, these fees are on average 70% lower than other emerging market country ETFs within the same Morningstar categories.

The funds expand the asset manager’s ETF footprint in Europe and complement its existing range of multifactor equity and actively managed fixed income funds.

Caroline Baron, Head of ETF Sales EMEA, Franklin Templeton, said, “Building on Franklin Templeton’s strong and extensive emerging markets investment heritage, we are delighted to introduce these four new emerging markets country passive ETFs at the lowest fees, to European investors.

“It was logical for us to start with Brazil, China, India, and Korea since these four high-growth countries represent the biggest country allocations within client portfolios and broad emerging markets indices. It is important to note that our new passive ETFs will be physically replicated which is rare in the emerging markets country ETF category. This is due to strong client feedback noting their preference over synthetically replicated ETFs.”

Patrick O’Connor, Head of Global ETFs for Franklin Templeton, added, “Our goal is to provide investors with the flexibility to construct diversified portfolios across active, smart beta and passive ETF strategies. This new suite of passive ETFs will provide a cost-effective way to access beta solutions, further rounding out our strong line up of 14 ETF strategies for European investors.”

The Brazil, China, and Korea funds are expected to list on Deutsche Börse in euros on 5 June, followed by cross-listings on London Stock Exchange (in pound sterling and US dollars) and Borsa Italiana (in euros) on 7 June and SIX Swiss Exchange (in US dollars) on 19 June. The India ETF is expected to list across all four exchanges sometime shortly afterwards.

Stéphane Degroote, Managing Director, ETFs and Derivatives EMEA, FTSE Russell, said, “We are pleased that Franklin Templeton has selected several of our 30/18 Capped index products as the underlying benchmark for four new emerging markets ETFs listed in Europe. These products will provide European investors with access to large and mid-cap stocks in a number of high-growth countries including China, Brazil, India and South Korea. FTSE Russell is a leading provider of indexes used by ETF issuers for a range of investable products with over $16 trillion in assets under management tracking our benchmarks.”

Franklin Templeton offers a similar suite of passive ETFs in US, similarly constructed using FTSE Russell indices. It includes developed market exposures (Australia, Canada, Europe, Europe Hedged, France, Germany, Switzerland, Hong Kong, Italy, Japan, Japan Hedged, United Kingdom and South Korea) and emerging market exposures (Brazil, China, Mexico, India, Russia, Taiwan and Asia ex-Japan), potentially shining a light on how the European UCITS line-up might evolve.

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